A tangled web of trade and tariffs: Speakers in Willmar discuss Minnesota impact, especially on agriculture

A tangled web of trade and tariffs: Speakers in Willmar discuss Minnesota impact, especially on agriculture

September 21, 2018

WILLMAR — Minnesota is a major player in both domestic and international trade. For businesses, producers, manufacturers and consumers, the recent trade disputes with many of the United States’ trading partners have caused questions and concerns to arise.

“There have been a lot of questions about what all this means,” said Ken Warner, president of the Willmar Lakes Area Chamber of Commerce.

In hopes of answering some of those queries and providing education on a very complex topic, the Willmar Chamber and the Kandiyohi County and City of Willmar Economic Development Commission held a public presentation Thursday on international trade and tariffs. The headlining speakers were Suzanne Cormie, the acting Consul General of Canada, and Jeff Phillips, the international trade manager for the Minnesota Department of Agriculture. Doug Loon, president of the Minnesota Chamber of Commerce, moderated the discussion.

Neighbor to the north

One of Minnesota’s — and the nation’s — strongest and most reliable relationships on many fronts has been with Canada. Annually, the two countries share over $680 billion in trade, which is nearly three times the amount the U.S. trades with China.

“We are friends, allies, partners. There are so many linkages between the two countries,” Cormie said.

Minnesota’s largest trading relationship is with Canada. The state exported $5.12 billion in goods and services to Canada in 2017 and approximately 174,200 jobs in Minnesota depend on trade and investment with Canada. In agriculture, the state exported $677 million in goods and imported $622 million.

There is also a significant number of cross-border supply chains in which products will cross the border several times before there is a finished product. Items and products made in Canada will have U.S. parts and vice versa.

“We not only sell things to each other, we make things together,” Cormie said. “The trade is highly integrated.”

While the U.S. and Canada have a historically amicable relationship, lately there have been tensions. When the U.S. put tariffs on steel and aluminum, Canada asked for an exemption. That was denied on national security grounds.

“We don’t think we are a national security threat,” Cormie said.

Canada then put its own tariffs on U.S. goods, which will remain in effect until the U.S. removes its tariffs. The tariffs are dollar for dollar for the amount of the U.S. tariffs, or $16.6 billion.

“We did send notice we would retaliate. We did not want to put on tariffs, but we really had no choice,” Cormie said.

The two countries are also trying to work out a mutually beneficial update to the North American Free Trade Agreement.

“Canada has worked in good faith,” Cormie said. “We want a good deal, not just any deal.”

Tariff impact

The different tariffs now in effect between the U.S. and other countries will impact Minnesota’s economy differently, especially in agriculture. There are about $34 million in Canadian tariffs against Minnesota agriculture goods, though most of it is against processed and prepared food products.

“It didn’t touch our soybeans or commodity levels. Canada was a good friend to us on this matter,” Phillips said.

The countermeasure tariffs from Mexico have more of an impact on Minnesota’s agriculture industry. Goods like corn, sweet corn, cheese and pork are being taxed.

“Our pork industry was really affected by that as well,” Phillips said. “It might hurt us for a number of years.”

The impact of tariffs between the U.S. and China also is likely to be long-term.

There have been three rounds of tariffs between the two countries. The Minnesota agriculture goods impacted include corn, pork, soybeans, wheat, beef and dairy.

“China is going to go on for a while,” Phillips said. “I think this is going to go on and on.”

While Minnesota’s economy is doing well, there are concerns the tariffs and trade disagreements with China, the European Union, Canada and Mexico could eventually have a negative impact. Minnesota imports and exports nearly $50 billion a year with other countries, with 80 percent of that coming from those same four, Loon said.

“We are one of the biggest trading states in the country,” Loon said. “When things aren’t going right with those trading partners, that has a potential impact on our economy in the state.”

While the trade disagreements and tariffs are worrying, the hope is the U.S. and its trading allies will be able to work everything out.

“The end game should be new trade agreements,” Loon said. “So we can have some certainty around where this is heading. Because we don’t want an economic headwind as a result of a trade war. That is not good for our economy.”